September 12, 2024

Letter to the Editor: A costless solution for new power

LETTER TO THE EDITOR — Environmental Defence’s annual tally of the federal government's financial subsidies to the oil and gas sector showed payments of just over $20 billion in 2022, which was followed up with another $19 billion in 2023.

That's a lot … especially for an industry that has recently reported record profits. In 2022, Statistics Canada reported total revenue for the Canadian oil and gas extraction industry rose to $270 billion. Net income (which Stats Canada defines as total revenue minus total expenses and deductions) sat at $63 billion almost double the previous year. This does not appear to be a sector in need of $20 billion in subsidies.

Those funds could be redeployed in a more productive manner. I would rather the government redirect the subsidy toward developing solar energy installations partly because it keeps the subsidy in the “power sector”, but principally because we need to develop our renewable energy base to help solve our climate crisis.

Let’s look at the solar alternative for those subsidies. In Canada, CBC reports solar subsidies currently come to about $1 billion a year. Very conservatively, Marketwatch estimates a $1 billion is more than enough to build 500 megawatts of solar power. If we redirected the entire oil and gas subsidy, $20 billion would be enough to build solar installations capable of producing 10 gigawatts of new power.

Now imagine if each year for the next 25 years, our government continued to redirect the same current subsidy paid to the oil and gas extraction industry and instead used those funds to build new solar power installations. At the end of 25 years we would have installed new electrical production capacity totaling 250 gigawatts.

We do know that today’s solar panels degrade over time. Forbes estimates current panels will still deliver 87% of their original expected output after 25 years. Even accounting for the panel degradation, we can expect our 250 gigawatt solar installations to be capable of producing 234 gigawatts at the end of the 25 years.

That represents additional new power over and above what Canada currently produces, which according to the International Trade Administration is just over 150 gigawatts. But it will be less than our expected electricity demand in 25 years. According to PWC Canada’s electrical needs are expected to almost double to about 275 gigawatts. PWC estimates that by 2050, electricity is expected to represent 40 to 45% of the Canadian energy mix (compared to 18% today) and will become the dominant end-use energy source. Most of the increased demand for electricity is a result of our goal to electrify our vehicles, our homes and our industries.

Importantly, there would be no additional government spending incurred by simply redirecting the expenditure of an existing program. But best of all, the redirection would provide us a new source of carbon free renewable energy with little to no maintenance costs.

This is not an argument to do away with oil and gas entirely. It’s useful in the right context. It is hard to envisage some industries, like jet travel, successfully switching to electrical power and natural gas electrical plants may still have a role to provide power when the sun doesn’t shine. But there is no need to indiscriminately burn gas when there are better alternatives. In most situations, we need to change. The sooner the better.

Canadian energy production has been too heavily skewed toward carbon generating sources which has created our climate crisis. All too often nowadays we are reminded of this by the worldwide increased frequency and intensity of climate catastrophes. Excess heat, flooding, fire, drought, land loss, hurricanes and typhons are the direct result of the carbon buildup in our atmosphere.

We have an urgency moving us along this path. We need to act soon and do more. Our Canadian governments at all levels are not acting quickly enough to help prevent future climate damage. Climate Action Tracker classifies the current Canadian government policies as “Insufficient” in terms of meeting our goals under the Paris Agreement. Canadians need to ask/force our governments into more action. Send this article to your friends, attend protests, write your MP and the party leaders, ask your governments to redirect our fossil fuel subsidy to solar energy. That alone will enable us to generate most of our electrical needs in 25 years at no additional cost. Plus we would be moving to a net zero carbon future and hopefully preserving our planet and our way of life.

I support green energy solutions.

Doug Crocker

Doug Crocker was a founding partner of Highstreet Asset Management in 1998 and later, Chairman of 18 Asset Management until 2021. He has written, presented and is published on economic forecasting, Ontario economic policy (for the Ontario Economic Council), derivative markets, quantitative investing, Environmental, Social & Governance (ESG) investing, and risk management. In retirement, Doug has been a Board Member of Ontario Nature, and helped organize Earth Day celebrations and climate change protests in Owen Sound, Ontario. Currently he is CFO of the local Green Party of Ontario constituency. A trained economist, Doug earned his MA in Economics from Queens University.

Sources used as reference in the article: Environmental Defence- Fossil fuel subsidies, Statistics Canada - Petroleum and Natural Gas Revenue and Net Income, CBC - Subsidies to renewable energy, Marketwatch - Cost of new solar installations, Forbes - Solar panel degrading, International Trade Administration – Canada’s current electrical production, PWC – Electricity demand and future needs, Climate Action Tracker – Evaluating Canada’s climate policies

 

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